Wall Street Stock Jocks Are Worried About A Modest Uptick In Broadband Competition

from the oh-no,-not-competition! dept

For decades, America's entrenched broadband monopolies have had it pretty good. Despite a brief blip there during the Wheeler FCC years, they've been hugely successful in gutting most of the meaningful regulatory oversight of natural monopolies. At the same time, they've been damn successful in using their political power to limit the threat posed by smaller competitors. The end result should be fairly obvious to those with eyes: Americans pay some of the highest rates in the developed world for patchy, slower service, and US broadband providers see some of the lowest consumer satisfaction ratings of any industry in America.

This is, it should always be remembered, a choice. For thirty straight years the central policy narrative in the US has been that if you mindlessly eliminate government oversight of regional monopolies with a generation of bad behavior under their belt, magic happens. You're to ignore that this promised telecom Utopia somehow never materializes despite twenty straight years of mindless deregulation, rubber stamped mergers, and the steady erosion of even baseline consumer and market protections.

With 5G deployment speeding up and promising new low-orbit satellite options on the horizon, Wall Street is starting to get nervous once again. They're also starting to get nervous about the threat that the Biden administration might actually engage in some base-levels of regulatory oversight. The consternation in investment circles is palpable:

"The 10-plus-year run cable stocks have enjoyed has been underpinned by the emergence of these companies as leading providers of residential broadband in the U.S. amid faltering competitive initiatives from players as large as Google," he said in a recent report to clients. "We are now entering a new competitive and regulatory cycle. While we currently think that history will repeat itself and risks will dissipate as they have in the past, it is far from certain and the group could be more volatile pending clarity."

That's Wall Street saying they think that monopolistic giants like Comcast won't see much of a threat to its revenues, but they're not sure. I always get a kick out of watching telecom trade mags and stock jocks, who genuinely couldn't care any less about consumer welfare, healthy markets, or level playing fields, hyperventilate over the faintest threat of competition and competent regulatory oversight. Genuine competition, balanced markets, and regulatory competence is consistently framed as a bad thing, since, for them and many of their clients riding the profits from rampant monopolization, it is.

The problem, as we've noted for a while, is that a lot of the "new competitive broadband threats" facing companies like Comcast aren't really all that threatening. Space X's Starlink, for example, doesn't really have the capacity to seriously threaten entrenched cable and phone companies in areas that have any real population density. And while fifth-generation wireless (5G) is also viewed as some kind of competitive panacea, consolidation in wireless (which will eventually lead to higher prices), fused with a persistent refusal to drive fiber to lower income areas (5G towers have to connect to something), remain a problem.

While 5G wireless broadband will certainly be useful, it's not going to magically fix an industry that's been broken for decades. Wireless connections are routinely capped, throttled, and face a universe of bizarre restrictions, like the industry's recent decision to charge you more money if you want HD streams to work as intended. "Unlimited" connections are routinely shown to be very limited (just ask California's firefighters), especially in more rural markets where limited fiber investment results in many users getting kicked off the network for using often ambiguous amounts of bandwidth.

So no, I see 5G and low orbit satellite as of genuine benefit when it comes to fixing some of America's rural broadband gaps (42 million Americans lack access), but not technologies that are going to seriously disrupt the AT&T and Comcast monopolies of the world (83 million Americans live under a broadband monopoly). I think the Wall Street stock jocks who've enjoyed ample profits under heavy monopolization don't yet have all that much to worry about.

Wall Street's also clearly worried about the potential that the Biden administration might actually engage in base-levels of regulatory oversight of telecom, but it's not yet clear that's a major threat to Comcast either. Biden has yet to appoint an FCC boss, meaning the agency remains in partisan gridlock after the rushed Trump appointment of Nathan Simington.

It's generally assumed that a Biden FCC will reverse most Trump policies and restore net neutrality, but I still don't think a full reversal is a given yet. I think it's equally possible a Biden FCC takes the safe path and mostly focuses on stuff that's easy politically and faces no real opposition from industry, like policing robocalls or opening up more spectrum to market. We'll have a better sense of this depending who Biden appoints to lead the FCC permanently.

And while the vague Biden broadband plan does promise to drive more competition to market, talk on this front is historically cheap. Over twenty years of covering telecom I've lost count of how many transformative promises of this type have been bandied about with little to really show for it. There are also questions about plan specifics, and how it's supposed to survive a Congress positively slathered in telecom campaign contributions.

It's fairly clear that Biden administration will be notably better than the Trump administration on broadband in one major way: the fact they're using real data to drive policy decisions, a stark contrast from the Trump / Ajit Pai era of just making shit up to support your monopoly-friendly ideology. But with "big tech" sucking all the oxygen out of the policy room (something "big telecom" has actively and repeatedly encouraged), it's still not entirely clear we're taking the problems created by "big telecom" seriously, or if we plan to genuinely do much about it anytime soon.

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Filed Under: broadband, competition, wall street